Possible arbitrage to Asia for long Europe propane

01 April 2009 16:18  [Source: ICIS news]

LONDON (ICIS News)--An arbitrage window into Asia could provide a helping hand to the flagging European propane market, traders said on Wednesday.

Much as the arbitrage window into Asia helped spark a recovery in the naphtha market during the first quarter of 2009, so too could an arbitrage opportunity provide support for the feedstock during the typically quiet second quarter.

Demand for propane in Europe is normally weak once warmer weather negates the need for heating fuel, and participants had been noting relatively quiet trading conditions.

As such, according to global chemical market intelligence service ICIS Pricing, propane prices have shrunk from almost $600/tonne (€468/tonne) FOB ARA in early February to spend most of March hovering around $330-350/tonne FOB ARA.

However, traders are hopeful that reports of severe shortages for propane gas in Asia could provide unexpected support for the feedstock.

“I have heard there’s a shortage in the east, while the North Sea supply remains way too long,” said one source.

“My guess is that someone will move product east. Floating storage has made working arbitrage opportunities a little difficult, but I haven’t seen too much floating storage for propane right now,” added the source. “VLGCs (very large gas carriers) for LPG are still available – and cheap.”

($1 = €0.75)

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By: Alex Davis
+44 20 8652 3214

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